(Reuters) - New orders for U.S.-made goods rose for a second month in April, boosted largely by defense spending, but the overall manufacturing industry continued to struggle under the weight of higher interest rates.

Factory orders increased 0.4% after a 0.6% gain in March, the Commerce Department said on Monday. Economists polled by Reuters had forecast orders rising 0.8%. Orders increased 1.4% on a year-on-year basis in April.

The sector, which accounts for 11.3% of the economy, is being dragged down by the Federal Reserve's fastest interest rate hiking campaign since the 1980s.

Banks have tightened lending also following the recent failures of three U.S. banks, while spending is shifting away from goods, typically bought on credit, to services.

Businesses are cutting back on restocking in anticipation of weaker demand later this year. The Institute for Supply Management last week said its manufacturing PMI contracted for a seventh straight month in May.

(Reporting By Dan Burns; Editing by Chizu Nomiyama)